Help with emergency $$ options!

[engineerjourney]

So we used to have a healthy emergency fund... the I took some unpaid maternity leave and we invested some, buying into the thought of optimizing our money outside of a savings account.

Well, now, due to a string of terrible luck (family death, medical emergency, pet emergency, car rear ended, two cracks in car glass within a week, etc), our emergency fund is around $2000.  We save automatically before money goes to checking so we run a thin margin in our checking account.  Now our furnace needed some cleaning.. while they were inspecting it.. it caught on fire... so now we are replacing a furnace for $4900.  We don't have that money right now in savings/checking, I see several options to pay for it and would appreciate opinions or other ideas I haven't thought of.

1. Credit card balance until extra money comes in (a couple months with our current auto saving level)
2. Sell taxable stock (realizing a loss there as it is in international index fund and it's down since we bought it)
3. Reduce our 401k savings and not max out this year
4. Home equity loan for small amount
5. Pull from Roth contributions
6. ??

I am leaning toward option 2 as the easiest to deal with.  I can't take much more of this crap. Would probably sell enough to to cover the furnace and bump up our emergency fund. I now fully believe in having a healthy emergency fund in savings just for ease of getting to money when you are stressed the fuck out by life :(

[cdttmm]

Personally, I'd charge the furnace on a credit card with a 0% promotional rate. Those rates often last at least 6 months and sometimes as long as 18 months. Over the next few months I would take half of what normally goes into the ER fund and use it to pay off the credit card. This way I'd still be rebuilding my ER fund to cover the next emergency, but be able to pay off the card before the teaser rate expires. On the off chance that things continue to go sideways before I've paid off the credit card and/or rebuilt the ER fund, then I can always take advantage of the other options.

[nawhite]

None of your options are bad and you've done a great job of identifying the alternative options. Personally I'm a fan of the heloc if you have time to get it set up as it was basically designed for your exact situation.

If pulling out of taxable accounts, if you have different buckets, you should use the withdrawal as a chance to rebalance. I.e. pull from an account that has appreciated so that you can sell when it's high not one that that had losses because that is the definition of selling when low.

[ender]

Personally, I'd charge the furnace on a credit card with a 0% promotional rate. Those rates often last at least 6 months and sometimes as long as 18 months. Over the next few months I would take half of what normally goes into the ER fund and use it to pay off the credit card. This way I'd still be rebuilding my ER fund to cover the next emergency, but be able to pay off the card before the teaser rate expires. On the off chance that things continue to go sideways before I've paid off the credit card and/or rebuilt the ER fund, then I can always take advantage of the other options.

This doesn't seem like a bad idea. And realistically, most credit card payments are due a while out anyways, because they wait until the statement closes and then the payment is due a while later (close to a month normally).

So even if it's put on a normal card it still is close to 1-2 months out for when you actually need to pay the bill.

I wouldn't advise this to many people, but on this board I trust that people won't horribly screw up their lives with credit cards.

[engineerjourney]

Personally, I'd charge the furnace on a credit card with a 0% promotional rate. Those rates often last at least 6 months and sometimes as long as 18 months. Over the next few months I would take half of what normally goes into the ER fund and use it to pay off the credit card. This way I'd still be rebuilding my ER fund to cover the next emergency, but be able to pay off the card before the teaser rate expires. On the off chance that things continue to go sideways before I've paid off the credit card and/or rebuilt the ER fund, then I can always take advantage of the other options.

Omg, why didn't I think of this?? I have never carried a balance on a credit card before so I didn't even think to try to do so in a better way! And sure enough I have three credit card offers from the mail yesterday! Two with 0% promotional apr.. one which I even get 20,000 miles with. I am going to go this route I think and pay at least minimums to keep the 0% until I can just pay it off.

[engineerjourney]

None of your options are bad and you've done a great job of identifying the alternative options. Personally I'm a fan of the heloc if you have time to get it set up as it was basically designed for your exact situation.

If pulling out of taxable accounts, if you have different buckets, you should use the withdrawal as a chance to rebalance. I.e. pull from an account that has appreciated so that you can sell when it's high not one that that had losses because that is the definition of selling when low.

Thank you! I am going to get all the info from my bank about a heloc so I have it set up just in case (or at least know the quickest way to set it up).  Unfortunately I only have the one fund in taxable.. assets balanced in my retirement accounts though.   

[engineerjourney]

Personally, I'd charge the furnace on a credit card with a 0% promotional rate. Those rates often last at least 6 months and sometimes as long as 18 months. Over the next few months I would take half of what normally goes into the ER fund and use it to pay off the credit card. This way I'd still be rebuilding my ER fund to cover the next emergency, but be able to pay off the card before the teaser rate expires. On the off chance that things continue to go sideways before I've paid off the credit card and/or rebuilt the ER fund, then I can always take advantage of the other options.

This doesn't seem like a bad idea. And realistically, most credit card payments are due a while out anyways, because they wait until the statement closes and then the payment is due a while later (close to a month normally).

So even if it's put on a normal card it still is close to 1-2 months out for when you actually need to pay the bill.

I wouldn't advise this to many people, but on this board I trust that people won't horribly screw up their lives with credit cards.

Thank you, I am going to go this route!

[Zikzin]

Yup, MMM calls his credit cards as part of his emergency fund, a.k.a springy debt

http://www.mrmoneymustache.com/2011/04/22/springy-debt-instead-of-a-cash-cushion/

[engineerjourney]

Approved for a card with 0% APR until October 2017. Everything will definitely be paid off by then. Glad I posted!

[Yonco]

I would be asking more questions. If a company was working on it when the problem happened, should they be liable for the repair? Is it possible to get a discount because it happened on their watch? Can a few parts(circuit boards, wiring, motors) be replaced by a different company for half the cost? If this was caused by a fire, your homeowners insurance may cover it. I would look into these options before taking out debt to replace it. -Jon